Introduction
Students have already learned that industrialized nations provide external funding to the developing countries. This financing can be direct aid, or it could be indirect aid to international agencies such as the World Bank or the International Monetary Fund (IMF). Countries wanting to set up an international system of fixed exchange rates formed the IMF in 1944. Today, the IMF offers advice to all nations on monetary and fiscal policies. It also helps support the currency of some developing nations with loans so that the countries can compete in an open market.

Lesson Description
Students will use information from the International Monetary Fund Web site to find out more about the role of the organization.

Previous Knowledge Expected
Students should be familiar with the following term:
International Monetary Fund: international agency that provides loans and financial assistance to countries to promote international monetary cooperation and assist with economic development, growth, and trade

Applied Content Standards (from the National Council on Economic Education)
Standard 3: Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.
Standard 18: A nation's overall levels of income, employment, and prices are determined by the interaction of spending and production decisions made by all households, firms, government agencies, and others in the economy.

Instructional Objectives
1. Students will describe the purpose and areas of activity of the International Monetary Fund.
2. Students will describe the IMF's policy on emergency assistance.

Student Web Activity Answers
1. The IMF was created to "promote international monetary cooperation; to facilitate the expansion and balance growth of international trade; to promote exchange stability; to assist in the establishment of a multilateral system of payments; to make its general resources temporarily available to its members experiencing balance of payments difficulties under adequate safeguards; and to shorten the duration and lessen the degree of disequilibrium in the international balance of payments of members."
2. The areas of activity of the IMF are surveillance (appraisal of exchange rate policies), financial assistance, and technical assistance.
3. Answers will vary. Answers might include allowing members to borrow or withdraw funds needed to meet balance of payments due to unforeseeable disasters.
4. Student answers will vary. Possible answers include: a belief in the voluntary sharing of information to maintain a stable system of buying and selling currency; the promotion of international trade and open communication for the benefit of all; and a desire to ease the exchange of goods and services among countries.

Extending the Lesson
Encourage students to research further information about the International Monetary Fund. Much of this information is on the Web site. Students could also find current information in newspapers and trade journals.
Encourage students to learn more about the IMF. Have students role-play advisers to the IMF or a developing country. What types of decisions and recommendations would they make?

Student Web Activity